This work aims to illustrate an advanced quantitative methodology for measuring the credit risk of a loan portfolio allowing for diversification effects. Also, this methodology can allocate the credit capital coherently to each counterparty in the portfolio. The analytical approach used for...

An alternative generating mechanism for non-strict bivariate Archimedean copulas via the Lorenz curve of a positive random variable is proposed. Lorenz curves have been extensively studied in economics and statistics to characterize wealth inequality and tail risk. In this paper, these curves...

This paper provides a simple, yet reliable, alternative to the (Bayesian) estimation of large multivariate VARs with time variation in the conditional mean equations and/or in the covariance structure. With our new methodology, the original multivariate, n-dimensional model is treated as a set...

We employ and examine vine copulas in modeling symmetric and asymmetric dependency structures and forecasting financial returns. We analyze the asset allocations performed during the 2008–2009 financial crisis and test different portfolio strategies such as maximum Sharpe ratio, minimum...

The quantity theory of money remains a cornerstone of modern macroeconomics that provides a benchmark for the long-run behaviour of macroeconomic models. The direct empirical evidence for it is, however, less conclusive than suggested by scatterplots and the exaggerated correlations between...

The existing literature of copula-based regression assumes that complete data are available, but this assumption is violated in many real applications. The present paper allows the regressand and regressors to be missing at random (MAR). We formulate a generalized regression model which unifies...

Bayesian shrinkage estimation is a familiar concept that arises from minimizing the Bayes risk under the squared error loss. For observations over a period of time, Bayesian shrinkage estimators may be used to predict the value of a response variable for a subject, given previously observed...

Sergey Aivazian was the head of my department at the Moscow School of Economics, but he was much more than that. He played an important role in my life, and he contributed to my studies devoted to copula modelling. This small memoir reports how this amazingly polite and smart scientist helped me...

This paper proposes a novel copula-based local Kendall's tau framework to uncover richer nonlinear local dependence between two financial return series. This framework nests the concepts of global dependence, tail dependence and local dependence. Closed form solutions of local Kendall's tau in...

We employ the R-vine copula approach to study the dependence structures among non-ferrous metal commodity futures on the London Metal Exchange, focusing on the comparison before and after the 2008 financial crisis. We document that the center of dependence structure among non-ferrous metal...